How to Buy a House When Job Security Is Tentative

by Jeannine Mancini

When job security is tentative, committing to any long-term expense is often scary. Banks may be a little leery lending to applicants with an unstable source of income. Lenders generally prefer to see an established employment history with no gaps in employment. Although buying a home when job security is tentative may be more challenging, it isn't impossible.

Meet the credit requirements. Pay all your bills on time. Payment history accounts for 35 percent of a FICO credit score. If your job security is tentative, prove to the lender you are capable of meeting all your payment obligations. To obtain a conventional mortgage loan, most lenders prefer a credit score of 660 or higher. FHA credit requirements are less strict, requiring a minimum score of 580. In addition to credit, lenders assess an applicant's debt-to-income ratio. Pay off as much debt as you can, to ensure you have enough money to cover your mortgage each month — even if you're temporarily unemployed.

Build up a reserve. Lenders also prefer to see liquid assets that can serve as an emergency fund to pay bills and living costs if you lose your job. Ideally, lenders prefer to see enough money in the bank to cover at least six months of expenses. With tentative job security, it is best to have a little extra set aside to show the lender you are prepared.

Keep your job if possible. Even if your job security is tentative, it is best to avoid switching jobs until after you purchase a home. Lenders are looking for two years of employment in the same field, but a new job makes it difficult for lenders to forecast your earning ability without an established work pattern. You will need to provide recent pay stubs, W-2 forms, income tax returns and bank statements. The mortgage lender may verify employment by calling your employer or mailing an employment verification form to complete. Some lenders will ask for verbal and written verification from your current and past employers. The employer may even be asked to verify the likelihood of your continued employment. Mortgage companies have the ability to use their own discretion when verifying employment. If your job is not secure, you may need to explore multiple lenders. Consider using a mortgage broker to shop many lenders. Since brokers work with a variety of lenders, they are aware of each one's individual criteria and guidelines.

Ask the mortgage company about buyer protection benefits. For example, Bank of America offers borrowers the option to enroll in a Borrowers Protection Plan that covers the mortgage if you find yourself involuntarily unemployed, disabled or suffering a financial hardship. To qualify, you must enroll in the plan prior to closing. The home must be your residence and can't be an investment or rental property. The loan must be less than $500,000. If your lender doesn't offer protection, you may be able to purchase private mortgage protection insurance through a life insurance or homeowners' insurance company.